CORPORATE REPORT

2023

Business Philosophy

The goal of the Nippon Chemiphar Group is to make a differencein society by providing pharmaceutical drugs and health-related
services to help people become and remain healthy.
Nippon Chemiphar has operated as a pharmaceutical company since its founding
in 1950.
Throughout the years, we have consistently developed, manufactured, and solddistinctive, original pharmaceutical formulations. Since the year 2000, we have madegenerics a pillar of our business and conducted related development, manufacturing,and sales operations in-house.
We implement initiatives associated with drug discovery themes that target thedevelopment of innovative drugs, and diagnostic products that contribute to speedy
diagnoses. We are also actively taking on the challenge of multifaceted development,using the alkalization therapy expertise we have cultivated over many years.

NIPPON CHEMIPHAR CORPORATE REPORT 2023
Contents
Our value creation story

2

Business Overview

10

Value Creation Strategy

4

Pharmaceutical Products

11

Message to Our Stakeholders

6

ESG Initiatives for a Sustainable Society

20

Financial Highlights

9

Corporate Data

33

◆ Scope of Report
This report contains information regarding the Nippon Chemiphar
Group’s business strategy, financial situation, and corporate social
responsibility-related activities.

Cover painting
Provided by Paralym Art,* an association that assists artists withdisabilities to achieve economic independence by supporting
their business.

• Reporting period: FY2022 (April 1, 2022–March 31, 2023)• Reporting companies: Nippon Chemiphar Co., Ltd. and its
Group companies
Note Regarding Forward-looking Statements
Statements made in this corporate report with respect to current
plans, estimates, strategies and beliefs, and other statementsof Nippon Chemiphar are forecasts for the Company’s future
performance. These forecasts are based on information currently
available to management. Consequently, they are subject to known
and unknown risks and uncertainties and may differ significantly
from actual results. Items that may influence forward-looking
statements and forecasts include changes in the economy,changes in the business and competitive environment for Nippon
Chemiphar’s business, revisions to the Pharmaceutical Affairs Law
and related legislation, and other items not limited to the above.

Title: Niji to Hansen (Rainbow and Sailboats)
About the artist: Magari Ohishi lives in Kobe City, Hyogo
Prefecture. He is known for his landscape and still life paintings.
The rainbow in this work uses five colors, but was painted in such a
way as to suggest that seven colors have been used. The different
shapes of the sails represent the individuality of each ship, while
the different directions in which each ship is sailing represent thewelcoming of diversity.
* Welfare service for people with disabilities or intractable diseases
who, due to reasons associated with age or physical strength,
have difficulty working at companies or other conventional placesof business. Through this support, individuals can receive training
involving light work or other forms of employment.

Nippon Chemiphar’s Three Plus 1 Principal Goals
Since 2000, Nippon Chemiphar has promoted a basic management strategy based on three goals: establishing astrong presence in the generics business; becoming a leader in the field of alkalization therapy; and pursuing inhouse drug discovery and development.
To attain these three goals, we are working to increase our earning capacity through the generic drugs
business; deploying multilaterally the additional business foundation we are building by leveraging our alkalization
therapy expertise, cultivated through Uralyt; and striving to secure further growth, over the medium to long term,
through in-house drug discovery and in-licensing of new drugs.
We believe that these efforts will enable us to maximize the value of our corporate Group and achievesustainable growth as we combine businesses that are advancing on different time horizons, as well as expand
overseas the results that these businesses generate in Japan.

FY2022 topics related to our threeprincipal goals
Goal 1: Generic drugs
Strengthen profit structures whilepursuing added value and efficiency
using a quality-based approach

Generic drugs and diagnostics▶

• In addition to further strengthening our quality
assurance system, we have introduced two- andthree-shift operations at both domestic and overseas
factories to address the industry-wide need to ensurestable supplies

Diagnostics• We increased the production capacity of our
DropScreenTM reagent, and initiated promotional
support on the part of our pharmaceutical sales
department, resulting in domestic installations of
DropScreen measuring equipment topping 500 units

Diagnostics

Goal 2: Alkalizer
Apply multilaterally expertise related toalkalization therapy

Alkalization therapy▶

• Phase 2 clinical trials of our pipeline drug DFP-17729
have ended, and the data is currently being analyzed• We expect to bring the drug to market in FY2026

Goal 3: New drug development

Drug discovery and development

Globally develop unique new drugs
internally created as well as in-licenced• We signed a licensing agreement for the developmentof NC-2500 in China• Specific out-licensing negotiations are ongoing withoverseas companies for NC-2600• NC-2800 is currently in phase 1 clinical trials• Favorable phase 2 results for DFP-14323 were
presented at an academic conference▶

Overseas business

Plus 1: Overseas Business
Generate sustainable growth by
expanding results of goal-related
efforts overseas▶

• In Vietnam, we have obtained approval for
Rebamipide tablets• We are applied there for another product, withadministration and dosage that differ from those inJapan• Having conducted market research on sales in the
Middle East and Africa, we are narrowing down
possible target countries and partners

Nippon Chemiphar Corporate Report 2023

1

History of value creation

For the past 73 years, Nippon Chemiphar has remained true to the time-honored traditions we have inherited. Keeping pacewith the times, we have courageously remedied issues requiring attention, and spared no effort in taking on new challenges. Ina word, our history is one of “immutability.”
We will continue to strive to develop, manufacture, and sell generic drugs that can be used safely by patients and medical
institutions, and continue to take on the challenge of developing new products and new drugs to increase the Group's value.

Main product developments and business strategies
1951

1957

1976

1988

1993

2000

2001

2007

2020

2020

Manufacture andmarket our products,
Nalpyrin and Nalbron(injectable solutions,pain relievers, andantipyretics for use
by doctors).

Begin marketing
imported drugs.

Expand into theclinical diagnostics
business, in
anticipation of
the increasing
importance of premedication clinicaltests in the future.

The need for urinary
alkalinizationis recognized
in response
to increased
complications inpatients with goutand hyperuricemia
due to changes inliving conditions.
Launch alkalizing
agent Uralyt-U.

Launch Soleton tablets (an analgesic/antiinflammatory agent) developed in-house. The
product has few side effects.

Full-scale entry
into the genericdrug business.
Change policy frombeing a new drug
manufacturer to a
manufacturer that
handles both new
drugs andgeneric drugs.

Launch allergy-specific IgE measurement
device DiaPack 2000 and dedicatedmeasurement reagent IgE NC.

Three Principal
Goals established
as a longer-term
strategy that divides
our growth prospects
into three stages.
This remains ourbasic strategy to thisday. In 2015, we add
overseas businessas Plus 1.

Launch DropScreen, an allergy screening
test kit. It allows 41 items to be measured witha single drop of blood. Of compact design,
the kit occupies a space about the size of an
A3 sheet of paper, allowing it to be used forin-hospital allergy testing.

Sign a licensing agreement with DeltaFly Pharma for DFP-17729, a cancer
microenvironment improving agent. Supports
development at Delta-Fly Pharma with ourexpertise in alkalinization.

1958
Launch sales of
Donpyline tablets(therapeutic agent
for neuralgia andrheumatism),manufactured inhouse.

1983
Advance into thecosmetics and healthfood fields.

2003
1995

2021
Sign a joint development agreement andoption agreement for NC-2800 with Sumitomo
Pharma. NC-2800 is a compound discoveredat Nippon Chemiphar's drug discovery
research laboratories. It has the potential
to become a revolutionary antidepressant/antianxiety drug with superior efficacy andsafety.

Launch Pravastan, thefirst in-house developed
generic drug.

Market Calvan tablets (for hypertension).

Measuring device A-1
Specific IgE measuring
kit ST-1

2005
License out NC-2400 (lipid metabolism
improving agent) to Cerenis.

Business development centeredon pharmaceuticals for doctors,
and business expansion against
the backdrop of Japan’s universal
health insurance system.

Starting in 1950

Since 1980, have been
restoring trust and launching
new drugs

Following an incident of data falsification, newdrugs are launched as we strive to regain trust.

Since 2000, expanding
generic drugs

Conclude a licensing agreement with
Delta-Fly Pharma for antitumor drug DFP14323. Development targeting lung cancer
is underway, and we are strengthening thepipeline in the oncology field.

Since 2015, pursuing new drug and new productdevelopment and overseas expansion funded byearnings from generics business.

Sale of generic drugs increases, resulting from government
policy promoting their use.

Business timeline(Sales, bn yen)
40
1950

1977

1982

2002

2010

2015

Establish Ibaraki Factory in
Makabe-gun, Ibaraki Prefecture(Nihon Pharmaceutical Industry's
current Tsukuba Factory)

The Ministry of Health, Labor andWelfare’s medical fee revisions for the firsttime include measures to promote the useof generic drugs.

Nihon Pharmaceutical Industry
Co., Ltd. becomes a subsidiary

Establish Nippon Chemiphar Vietnam
Co., Ltd. (NC-VN) in Vietnam.

Company changes name to Nippon Chemiphar Co., Ltd.

Clinical trial data submitted with application for
approval of three new drugs is found to havebeen partially falsified. The then-Ministry of
Health and Welfare orders an 80-day freeze
on Chemiphar's manufacture and import of all
pharmaceuticals.

1973

1986

Establish Hitachi Chemical Co., Ltd. (as Chemiphar was formerly
known) with the main business being the manufacture and saleof pharmaceuticals

1970

30

20

2007
A quantitative target for generic drugs(30% or more) is set for the first time in thebasic policy of the government’s economic
and fiscal reforms.

Safety Research Institute for ChemicalCompounds Co., Ltd. becomes a subsidiary

Establish laboratory in
Misato City, Saitama Prefecture

2014
Third plant at NPI’s Tsukuba
factory comes on line.

2017
Establish West Japan Logistics Centerin Kobe City, Hyogo Prefecture, thus
having one base each in both East andWest Japan.

2018
NC-VN factory starts exporting to Japan.

1976• Transferred to the Tokyo Stock
Exchange’s First Section• Establish Japan SopharchimCo., Ltd. to ensure a stablesupply of fine chemicals.

10

1979
Establish office in London tocollect information on overseas
products for market research.

Sale of generic drugs2

Net sales1

Notes 1. Sales are presented on aconsolidated basis since FY1999.
2. We have disclosed sales ofgeneric drugs since FY2004.

0
FY 1950

2

1970

Nippon Chemiphar Corporate Report 2023

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2022

Nippon Chemiphar Corporate Report 2023

3

Value Creation Strategy

Nippon Chemiphar Group’s Value Creation Strategy

Business Model
Input*
Pharmaceutical products
Generic drugs (pp. 11, 12)

Human capital

Financial capital
Consolidated net
assets: ¥48 billion

Generic drugs thatlead to lightened burdens
on patients and publicfinanceIntellectual
capital
R&D: ¥2 billion

Creation of breakthroughdrugs
Manufacture and stablesupply of high-quality
pharmaceutical drugs
Greater safety of, andconvenience in,pharmaceutical drugs

Manufactured
capitalFactories: Japan,
abroadSocial andrelationshipcapitalWork with business
partners

Natural capital
Energy use (crude oil
equivalent) 6,524kl

Proprietary products and new drugs (p. 10)

Integrated system to develop,
manufacture, and market
generic drugs• Expand product lineup by in-licensing items from other companies

Alkalizer (p. 13)• Utilize cultivated technologies and expertise to expand application to conditions other thanhyperuricemia

In-house drug discovery and development (p. 14)• Develop and out-license items in our internal development pipeline• Improve development accuracy through use of new technologies and collaboration withexternal partners• Expand into new fields by in-licensing promising pipeline products

Diagnostics (p. 17)• Expand the use of DropScreen, create additional reagents

Overseas expansion of pharma ceutical products businessoverseas (p. 18)• Reduce manufacturing costs by using our Vietnam factory• Market abroad products made at the Vietnam factory and preempt overseas developments• Develop pharmaceutical products and clinical diagnostics abroad

OthersSegment

Market demands

Pharmaceutical Products Segment

Employees: 872 people(consolidated)• Develop value-added formulations that reflect medical needs• Improve quality assurance and our stable supply system

Strengths

Contracted testing (p. 10)• Use a comprehensive one-stop system to provide total support for non-clinical andclinical trials

Factories in Japan and abroad
attain advanced manufacturing
technology, become costcompetitive
Broader information delivery,
data gathering resulting frommarketing new drugs

Expertise in alkalizers andcitrate preparations

Venture-based drug discovery
research targeting earlyout-licensing to domestic andoverseas companies
Adoption of new technologies,
collaboration with specialists invarious disciplines and fields

Offered value
Increasedpatient QOL

Extended
healthy life spans

Reduced patientburdens, limited
healthcare expenses
Employees findfulfillment in personal
growth through work
Stable, sustainable
shareholder returns

Safeguarding of
global environment

Community
involvement• Quality assurance and stable supply (p. 12) • Corporate governance (p. 26)• Compliance and risk management (p. 29) • Initiatives to reduce environmental impact (p. 20)• Contribution to local communities (p. 23)

Our corporate philosophy, principles of conduct, support for employee abilities, and training system (p. 24)* Based on the IIRC framework for
FY2022 results.

4

Nippon Chemiphar Corporate Report 2023

Sustainable growth in corporate value through value creation cycle

Nippon Chemiphar Corporate Report 2023

5

Message to Our Stakeholders

Since 2000, the Nippon Chemiphar Grouphas developed business under a management
strategy focused on three principal goals:
establishing a strong presence in the generics
business; applying alkalizer-related expertise
multilaterally; and pursuing drug discovery
and development.
We enhanced this strategy in 2015, byadding one goal: Plus 1. The step represents ouroverseas market expansion, centered on Asia,
that will allow us to improve results even in areas
where we already have logged achievements.
By simultaneously pursuing the above
initiatives, each of which has a different timeline,
we will target sustainable growth through ourdistinctive business model and by delivering ourunique value to all our stakeholders.
Over the past three-plus years, efforts
associated with new drugs have allowed us tomake steady progress. This includes the licensing
agreements we have concluded for anticancer
drugs DFP-17729 and DFP-14323; a collaborative
6

Nippon Chemiphar Corporate Report 2023

research and development agreement; an
option agreement and commencement of phase1 trials for NC-2800, an internally developed
antidepressant and antianxiety agent candidate;as well as the licensing out of NC-2500.
In addition, we have generated consistentadvances through innovation-related initiatives,
which include the launch of our DropScreenallergy diagnostic product. In the category ofgeneric drugs, we have increased the strengthof our quality initiatives and are also solidifying
our business foundation by implementing Groupwide structural reforms that enhance efficiency
throughout our supply chain. At the same time,
we have reinforced our production system, which
comprises an extensive network of facilities andmany employees.

Kazushiro Yamaguchi
President & CEO
June 2023

Message to Our Stakeholders

Interview with the President
Q1
A1

Looking back, what kind of year was FY2022?
In addition to the NHI drug price revisions
implemented in April 2022 as in the previous year,
the need to respond to alternative demand resulting
from quality issues at other companies had asignificant impact on our business operations.

Since FY2021, numerous generic drug manufacturers havebeen found to have violated laws and regulations regarding
their manufacturing and quality control. This has resulted in
the suspension of their operations and product shipments,
with the consequent shortage of generic drugs persisting tothis day.
During the first half of FY2022, we responded tothis additional demand by utilizing inventory, while also
ramping up production. However, we found it difficult
to meet all the demand. Owing to the domestic labor
shortage, securing personnel at our Group plants did not
go as well as planned. At the same time, we were not able
to increase sufficiently the production of items outsourced
to other companies.
In the second half of the fiscal year, we were stillcompelled to make shipment adjustments on a numberof products. Then, for manufacturing-related reasons,
December saw us having to suspend shipments of someitems we had produced ourselves.
As a result, sales of pharmaceuticals decreased 6.7%
year on year to ¥26,148 million, and consolidated net sales
dipped 2.9% year on year to ¥31,559 million.
Q2

How will the Nippon Chemiphar Group
increase production?

A2

We plan to do so by increasing headcount, revising
work shifts, and making capital investments.

Given the urgent need for the generic drug industry to meetmarket demand and regain trust, the Group will continue
to increase headcount, as well as review our factory work
shifts in Japan and abroad, while upgrading our production
system and equipment. These efforts, coupled with capital
investment, will serve to increase production.
Then we are working to secure multi-source frommultiple manufacturing sites, to ensure that supplies arestable. As we continue to improve quality, we will set up asystem to enable us to boost production as soon as possible,
and thereby help alleviate the current supply shortages.
Q3

What is your earnings outlook for FY2023?

A3

Sales of pharmaceuticals are expected to decline,
due to NHI drug price revisions. But we anticipate
growth in consolidated sales, thanks to factors
such as the more widespread use of DropScreen.

In terms of our FY2023 earnings outlook, we expect sales ofpharmaceuticals to decline for a number of reasons, suchas the NHI drug price revisions implemented in April.

Consolidated Sales and Profit(¥mn)

FY2022 (Results)

FY2023 (Forecast)AmountDistrib.
(%)
AmountDistrib.
(%)

YOY
(%)

31,559100.0

32,700

100.0

＋3.6

Pharmaceutical products 30,543

96.8

—

—

—

Net sales

Pharmaceuticals

26,14882.9

25,870

79.1

(1.1)

Diagnostics

2,780

8.8

4,500

13.8

＋61.8

Others segment

1,015

3.2

—

—

—

Operating profit

(241)

—

200

0.6

—

Ordinary profit

58

0.2

100

0.3

＋70.4

Profit attributable toowners of parent

339

1.1

60

0.2

(82.3)

However, we forecast an increase in consolidated net
sales of 3.6% year on year to ¥32.7 billion. This should result
from continued domestic market penetration of DropScreen,
and the predicted growth in demand for contract testing.
Our forecast is for an operating profit of ¥200 million
and a profit attributable to owners of the parent of ¥60
million. This is expected to result from factors such as
a rise in the cost-of-sales ratio, due to NHI drug pricerevisions; higher purchase prices, reflecting soaring raw
material and energy costs; and increased research anddevelopment outlays.
We anticipate expanded capital investment, since weare planning to add equipment to the No. 3 plant at the
Tsukuba Factory to ramp up production. We also haveplans to deal with other factories that are now growing old.
Although we forecast a decrease in profit attributable toowners of the parent, we nevertheless plan to pay dividendsof ¥50.0 per share (for a payout ratio of 300.8%). In theinterests of maintaining stable shareholder returns, this willbe the same amount as in the last fiscal year.
Q4

What degree of market penetration have youachieved for the DropScreen allergy screening kit?

A4

At the end of FY2022, we had installed more than
500 units. On the back of our pharmaceuticalsales department’s promotional support, we soon
expect to achieve our immediate goal of installing
1,000 units in Japan.

Not only is the DropScreen kit a space-saving product,
but it requires only a small amount of blood to screen 41
items simultaneously and in a short time. Thanks to this, we
believe that the device is creating an in-hospital market for
immediate allergy testing which, traditionally, primarily has
been outsourced.
One of the greatest advantages of DropScreen isthat it makes immediate diagnosis possible, thus allowing
for treatment regimens to be quickly arranged. We havereceived feedback stating that the small-volume blood
sampling required has helped examinations go more
Nippon Chemiphar Corporate Report 2023

7

smoothly, especially when involving young children.
Our sales department’s promotional support, whichbegan in October last year, has delivered solid results inthe form of expanded product sales. So we are confidentof reaching 1,000 installations in Japan by the end of
FY2023. Moreover, we are planning to develop more
reagents and improve several aspects of our current
measurement equipment.
Since the device is attracting the attention ofoverseas companies, we are still working on it, taking into
consideration compliance with individual countries’ laws
and regulations, and continuing to seek out partners. We
are aiming for an overseas sales launch around 2027.
Q5

In terms of Chemiphar’s new drug pipeline, how is
the NC series of original compounds coming along?

A5

NC-2800 is now in phase 1 development, under the
AMED program, and we have signed a licensing
agreement with a Chinese company for NC-2500.

Antidepressant and antianxiety drug NC-2800 (an opioiddelta receptor agonist) has been adopted by the Japan
Agency for Medical Research and Development (AMED) for
its CiCLE Project. And we have concluded a joint researchand development agreement and an option agreement with
Sumitomo Pharma Co., Ltd. Sumitomo Pharma has joined
the project as a partner organization, and development isproceeding. Although phase 1 trials will take a little longer
than initially anticipated, we plan to complete phase 2a byaround 2027.
In February 2023, we concluded a licensing agreement
for NC-2500 (a xanthine oxidoreductase inhibitor,
hereinafter referred to as an XOR inhibitor) with Nanjing
Neiwa Faith Pharmaceutical Co., Ltd. (NF) in China forgout and hyperuricemia. The agreement has granted NF
exclusive licenses for the development, manufacture, andsale of the XOR inhibitor.
The agreement enables us to use know-how NF willobtain through development of the inhibitor, for gout andhyperuricemia in China, to expand to other regions.
Having added chronic cough to the indications for
NC-2600 (a P2X4 receptor antagonist), we are currently
conducting specific out-licensing negotiations withcompanies abroad. Since this is a first-in-class peripheral
antitussive agent, we expect out-licensing to be possible
relatively quickly.
Q6

What can you tell us about the progress of trials
for anticancer agents DFP-17729 and DFP-14323,
for which you have a licensing agreement with
Delta-Fly Pharma Co., Ltd.?

A6

Both products have completed phase 2 trials,
and preparations are currently underway for the
implementation of the next phase.

Phase 2 trials using DFP-17729 for pancreatic cancer
patients were completed in FY2022, and the data is

8

Nippon Chemiphar Corporate Report 2023

currently being analyzed in preparation for the next phase.
DFP-17729 improves the cancer microenvironment andis expected to be a breakthrough therapy for refractory
cancers by alkalizing acidic microenvironments. This is thefirst time ever that our know-how, accumulated over many
years, on alkalization therapy is to be utilized for anticancer
drug development, and it can be described as a truly an
innovative undertaking.
DFP-14323 also has shown favorable results in phase2 trials on lung cancer patients, and Delta-Fly Pharma
is preparing to conduct phase 3 trials based on thoseresults. DFP-14323 strengthens the immune response ofcancer patients by binding to aminopeptidase N that ispresent on the surface of cancer immunocompetent cells,
and will enhance efficacy of standard anticancer drugs
without increasing the side effects. It has potential to be atherapeutic agent for elderly and terminal cancer patients.
Q7

We understand that you have announced
the Group’s transition from the Tokyo Stock
Exchange’s Prime Market to the Standard Market.

A7

We applied for listing on the Standard Market thisJune, having decided that doing so would enable
shareholders to feel secure in owning and trading
Company shares.

In December 2021, we submitted a market segment criteria
compliance plan for FY2022 to FY2026, designed to meet
the Tokyo Stock Exchange’s (TSE’s) Prime Market listing
requirements. Since then, we have been following that plan.
Then, in FY2022, despite experiencing a slight delay
in securing earnings in our generics business, we madesteady progress in our management strategies. Among themany initiatives that have been progressing as planned, werecorded earnings growth for DropScreen and other areasof our diagnostics business; diversified application of ouralkalizing agents into the area of cancer treatment; reported
new drug discoveries; enhanced our IR activities; andincreased the number of shares we have in circulation.
However, according to the April 2023 revision of the
TSE’s rules, it was announced that the continued listing
criteria’s transitional steps would end on March 31, 2025.
Although we already had put in place a five-year plan tomeet TSE listing criteria, the possibility now arose that
our shares might temporarily be designated as being
under supervision.
Recognizing the urgent need to ensure thatshareholders feel comfortable about owning and trading
our Company’s shares, we applied for listing on the TSE
Standard Market. We expect to make the transition on
October 20 this year.
Nonetheless, all of the initiatives contained in our plan
to meet the continued listing criteria remain fundamental
to our management strategy, and we will pursue them so
as to maximize our corporate value and achieve sustained
growth. I trust that we will have the ongoing support of our
stakeholders as the Nippon Chemiphar Group’s efforts toinnovate steadily bear fruit.

Message
Financial
to OurHighlights
Stakeholders

MessageFinancial
to OurHighlights
Stakeholders

Financial Highlights┃Net Sales┃Operating Profit

(¥mn)

(¥mn)

40,0001,500

34,18230,000┃R&D Expenses
（%）
7.5

1,464

(¥mn)
2,500

2,392 2,419
2,173

2,000

31,756 31,541 32,506 31,559

1,000

825

2,066

1,998

5.0

4.3
1,500
564

500

20,000

364

2.5
2.5

1,000

1.8

1.1
0

10,000

0
500

(241)
(500)

0
FY2018

2019

2020

2021

0

2022

FY20182019■ Operating profit┃Total Assets, Net Assets, Equity Ratio(¥mn)
50,00049,453 48,571

2020

2021

FY2018 2019

2022

Depreciation Expense

(¥mn)

(¥mn)

50

3,000

2,000
1,812

40
38.2

2,000

37.4

18,014 18,501 18,534

1,801

1,000

1,345

1,131

0

479

35

784
660

(394)
10

0

0
2020

■ Operating profit

2021(1,024)(916)(1,310)0(2,000)FY2018 20192020 2021 2022
■ Operating cash flow ■ Investment cash flow

2022

Operating ratio

Free cash flow

┃Amounts per Share

573

500

(1,000)(960)

FY2018 2019

1,272

1,000

17,392

10,000

1,500

1,393

1,235
326

20

1,586

1,500

1,837

1,720
1,503
1,394
30

17,863

2,196

38.1

30,00020,0002022┃Capital Expenditure,┃Cash Flows(%)

40,00037.9

2021

Operating ratio

46,926 45,862 47,124

38.0

2020

FY2018 2019

2020

2021

2022

■ Capital expenditure ■ Depreciation expense┃Composition of Shareholders┃ROE, ROA(As of March 31, 2023)
(¥)

(¥)

(%)

6,000

300

5

5,000

4,963.24 4,830.92
5,006.49

Financial instruments business operators
1.8%

5.0

5,119.99

5,130.65 250

4
3.8

4,000

200

3.2
3

3,000

2
2,000

100.0

50.0

50.0

50.0

50

1.8

50.0
245.11121.42 137.75 194.33 94.07

FY2018 2019

2020

2021

Other
Japanesecompanies
30.7%

Individuals
35.0%

0.7
0

2022

■ Book value per share ■ Dividend per share

Earnings per share

1.3

1Foreigninvestors
4.5%

2.1

2.5

100

1,000

0

Treasury stock
14.3%

2.8

150

Financial
institutions
13.6%

0.1

0
FY2018 2019

Return on equity

2020

2021

2022

Return on assets

Nippon Chemiphar Corporate Report 2023

9

Business Overview

I

Pharmaceutical Products Segment

1. Pharmaceuticals(1) Generic products
While the market has reached maturity as the government’s
target for the usage rate of generics is close to being
attained, several manufacturers have experienced quality
problems. The industry now faces the challenge of having torestore trust. Given the circumstances, Nippon Chemiphar—which develops, manufactures, and sells generics—willcontinue to improve the quality of their products while
ensuring that supplies are stable. At the same time, theCompany will go on developing products that meet theneeds of patients and healthcare professionals.
In addition, we are using the experience and expertise
we accumulated through the sale of new drugs to provide
and collect information regarding the proper use ofpharmaceutical drugs, while conducting promotional
activities targeting medical professionals, in part throughevents such as research conferences.
☞ Please refer to page 11 for details.
(2) Proprietary products and new drugs
Nippon Chemiphar categorizes new drugs that it hasdeveloped, as well as new drugs and long-listed drugs inlicensed from other companies, as “proprietary products
and new drugs.”
Among its proprietary products are three formulations
that the Company developed in-house: alkalization
therapeutic drug Uralyt-U, analgesic and anti-inflammatory
drug Soleton, and hypertension therapeutic drug Calvan.
Included among the new and long-listed drugs we havein-licensed from other companies are new oral intestinal
cleansing agent PICOPREP and macrolide antibiotic
agent Klaricid. We expect these to strengthen our productportfolio and anticipate utilizing them to generate synergies
that will help expand our generics business.
We are planning to take on the challenge ofdrug discovery themes aimed at the development ofgroundbreaking new drugs, including pipelines developedwith the support of public funds. We are also working on thelicensing in of drugs with potential synergistic effects withareas in which we have our own expertise and pipelines.
☞ Please refer to page 14 for details.

2. Diagnostics
Nippon Chemiphar provides measuring equipment andreagents used to fight allergies and lifestyle-relateddiseases. In 2020, we began selling DropScreen, agroundbreaking new product developed in-house thatallows quick allergy screenings to be carried out using
minimal blood samples. Since the product’s launch,
we have received tremendous feedback from medical
institutions and patients.

10

Nippon Chemiphar Corporate Report 2023

We are planning to accelerate the domestic andoverseas deployment of DropScreen, and develop
diagnostics into an earnings pillar for the Group. In addition,in 2022, we began marketing the new glycohemoglobin
analyzer HLC-723 ® GR01 developed by Tosoh Corporation.
☞ Please refer to page 17 for details.

II Others Segment
1. Contracted Testing
The Nippon Chemiphar Group facilitates the creation ofsafe, high-quality products by providing support for nonclinical and clinical trials performed when developing
pharmaceutical products and medical equipment.
The Group company Safety Research Institute for
Chemical Compounds Co., Ltd. has set up an internal
system to support clinical and non-clinical studies
conducted to help develop a number of therapeuticmodalities. These include pharmaceutical drugs, medical
devices, and regenerative medicine-related products.
Thanks in part to this system, the institute has attained a
distinctive status among contract research organizationsin Japan.

Using the Bovine Corneal Opacityand Permeability test.

A good laboratory practicecompliance certificate for aregenerative medication

2. Healthcare-related Products
The Group handles a diverse array of healthcare products,
including nutrients, health foods, cosmetics, and various
types of creams, classified as quasi-drugs because they
contain a certain concentration of active ingredients.
Amid the rising needs surrounding consumer selfmedication, we are leveraging trustworthiness, thedevelopment expertise we have gained as a pharmaceuticalproduct manufacturer, our goal to make a difference inpeople’s lives, and our efforts to provide a high level ofadded value.

Line up of our healthcare-related products

Business Overview

Pharmaceutical Products

Pharmaceutical Products

I

Initiatives Involving Generics

In Japan, as the fulfillment of the government’s target of
80% generic drug usage by volume draws near, the market
is reaching maturity. In addition, due to quality issues at othercompanies, the public has grown increasingly leery of thequality assurances given by companies handling generics
and their ability to maintain stable supplies. Moreover, thebusiness environment has become ever more severe, due
to repeated NHI drug price revisions.
We have been developing the market for generic drugs
by capitalizing on our strength as an integrated developer,
manufacturer, and seller. In recent years, we have sought
to secure profitability by reducing costs by manufacturing
overseas. While maintaining a stable supply of generics,
we will continue to enhance our quality assurance andstrengthen our earnings base by providing added valuethat only we can deliver. This we will do by using reliable
information and continuing to create products that meetmarket needs.

2. Manufacturing
Aiming to improve productivity and reduce manufacturingcosts at Nippon Chemiphar Vietnam’s factory, we are
currently working to offshore production from our factories
sites in Japan. As the plant approaches normal operational
capacity, the cost of manufacturing there is expected to drop
20–30% below our Japan levels.
In addition to offshoring products to our highly costcompetitive Vietnam factory, we plan to utilize the advanced
technological capabilities of our main Tsukuba factory tocreate added value and enhance Group manufacturing
productivity. To meet the increased demand resulting fromother companies’ quality problems, we plan to increase
capital investment and headcount. To this end, in FY2022 wecommenced two- and three-shift operations at our domestic
and overseas factories.
☞ Please refer to page 18 for overseas manufacturing.

1. Development
Competition among pharmaceutical companies is growing
increasingly intense. Primarily, it is a result of both theprevalence of authorized generics and the increasing
difficulty of developing them.
To maintain our good reputation in the market despite
this, we must improve our overall development capabilities.
We shall do so by launching products ahead of othercompanies; improving the accuracy of development throughcooperation with academia; and developing value-added
formulations that meet the needs of the medical profession.
We aim to develop products that are highly regarded
in relevant markets by concentrating our development
resources and implementing efficient procedures.
☞ Please refer to page 22 for information on tablet imprint
and packaging.

Tsukuba factory

Vietnam factory

Nippon Chemiphar Corporate Report 2023

11

3. Quality Assurance

5. SalesTo ensure quality control and production management of
the highest standards, our quality assurance efforts comply
with good quality1 and good manufacturing practices.2
In order to confirm that we appropriately manage thedrugs we manufacture, we evaluate the degree to which
the raw materials and additives we use in production
conform to stipulated standards; assess our methods ofprocurement and storage of materials; and appraise how
we ship our products.
We are constantly making every effort to strengthen
our Group-wide reliability assurance system tofulfill our fundamental responsibilities as a maker ofpharmaceutical products. This we do primarily throughour Group Quality Assurance Management Department.
At the same time, we conduct periodic audits of ourGroup’s and contract manufacturing site.

In response to the changes in the environment surrounding
generic drugs, we are seeking to take advantage of adiverse range of sales channels that will synergize with thedistinctive attributes of both Nippon Chemiphar and Nihon
Pharmaceutical Industry Co., Ltd.
In addition, the Nippon Chemiphar Group is moving
ahead with initiatives aimed at enhancing characteristics
that highlight the advantages of its formulations,revamping its sales force automation efforts (sales
support systems), and streamlining sales efforts throughthe application of AI technology.

1. According to quality standards for drugs, quasi-drugs, cosmetics, andproducts such as regenerative medicine.
2. According to laws on the control of the manufacture and quality ofdrugs and quasi-drugs.

4. Ensuring a Stable Supply Structure(1) Logistics management system
As generics become more prevalent, manufacturers
are taking on growing responsibilities with regard to
supply stability. This requires carefully crafted logistics
systems. The Company is expanding its distribution
system nationwide together with Otsuka Warehouse
Co., Ltd., which allows us to improve the quality of ourlogistics by cutting lead times, tracking transit status inreal time, and preventing incorrect deliveries.
(2) Double-sourcing active pharmaceutical ingredients
Providing a steady supply of drugs requires efforts bothto reinforce manufacturing capacity and ensure the stableprocurement of active pharmaceutical ingredients (APIs).
To meet the requirement, we are strengthening oursurvey and evaluation efforts to secure optimal multi-source
API supplies in Japan and overseas.

12

Nippon Chemiphar Corporate Report 2023

Pharmaceutical Products

II Alkalizer
Since the launch of Uralyt in 1988, we have been working to cultivate alleviation of aciduria and alkalization therapy. By utilizing
our know-how accumulated over many years, we are trying to expand alkalization therapy to various fields, such as new
therapeutic areas and application to health food.

■ Application of alkalization technologies

Uralyt・Gout・Hyperuricemia
・Acidosis

Conduct a wide range of activities
utilizing our alkalinization-related
technologies and expertise

Anti-cancer agent(DFP-17729 forpancreatic cancer）

Health foods(Test-marketed one item
in FY2022; now
considering future items)

Prevent progress ofchronic kidney disease(Evaluating results of CKOALA study)

1. Development in Oncology
In March 2020, we concluded a licensing agreement withJapanese drug discovery venture Delta-Fly Pharma, Inc.
concerning DFP-17729, an anticancer drug that improvescancer microenvironments through alkalization.
By alkalizing tumor microenvironments, DFP-17729 has
been shown to suppress cancer cell activities and facilitate
the efficacy of anticancer agents in non-clinical studies.

■ Mechanism of DFP-17729• Improves cancer microenvironments through alkalization.
• It is expected to generate groundbreaking therapeutic effects as atreatment for refractory cancer.
Acidic environments, generated aroundtumors by extracellular excretion,
facilitate cancer growth.
Cancer cell activity is
expected to be inhibited.
Cancer microenvironment*
CancerAcid

Cancer microenvironment

Administer DFP-17729

CancerBecomes alkaline* In contrast with healthy tissue, cancerous tissue is surrounded by adistinctive environment.

Delta-Fly Pharma completed Phase 2 clinical study
for end-stage pancreatic cancer in 2022 and have been
analyzing data for the next phase study. We expect that
DFP-17729 could be launched in FY2026 at the earliest.
Later, we will consider expanding its application toother types of cancer.

2. Treatment for Chronic Kidney Disease
It is said that some 13.3 million people suffer from chronic
kidney disease (CKD) in Japan. Once it progresses, dialysis
is required and, since the number of patients on dialysis inJapan is increasing, steps must be taken to reduce related
medical costs.
For many years, we have supported the clinicalresearch (CKOALA study)* conducted at Tohoku University
to clarify the relationship between urinary alkalization
medications and CKD. Based on research results, we areconsidering how to develop the treatment for CKD by using
AI and real-world data.
* The title of the study is “Investigation of the renal protective effect of oral
alkalizing agents in chronic kidney disease.”

3. Application to Food Products
By applying alkalization know-how we have accumulated
through Uralyt and clinical researches, we are trying
to expand to health-promoting foods. In FY2022, we
conducted test sales of one item. Based on the dataobtained, we are considering future plans.

Nippon Chemiphar Corporate Report 2023

13

III Drug Discovery and Development
We are working to develop new breakthrough drugs to combat diseases for which currently there are no appropriate
therapeutic drugs. To this end, we are conducting venture-like drug discovery research, through which we license out
compounds—discovered through internal exploratory research—to highly specialized domestic and overseas companies
at early stages of development. To expand our pipeline and incorporate AI and other rapidly evolving digital technologies inour drug discovery methods, we have been pursuing alliances with companies and research institutions that are conducting
cutting-edge research in their respective fields.
As of March 2023

In-house drug development

Preclinical

Phase 1

Phase 2

TargetNC-2400

PPAR-δreceptor agonist
for lipid metabolism
abnormalities• Finished phase 1 trials• Licensed to Abionyx Pharma SA (France)

NC-2500

XOR inhibitor
for hyperuricemia, gout

• Since February 2023, development for gout andhyperuricemia has been underway at an out-licensed
Chinese company• Exploring possibilities for applications forneurodegenerative diseases

NC-2600

P2X4 receptor antagonist
for neuropathic pain,
chronic cough• Phase 1 has ended and we are conducting licensing-out
activities for chronic cough in addition to neuropathic pain

NC-2700

URAT1 inhibitor
for hyperuricemia, gout

• Finished preclinical studies and are conducting
licensing-out activities

NC-2800

δopioid receptor agonist
for depression and anxiety• Selected by AMED for its funding program in January 2018
• Concluded a collaborative research and development
agreement and an option agreement with Sumitomo
Pharma Co., Ltd. and began phase 1 trials

DFP-17729

Cancer microenvironment
improving agent
for pancreatic cancer• Concluded a license agreement with Delta-Fly Pharma,
Inc. and acquired exclusive rights to market in Japan• Analyzing phase 2 data for next stage study

DFP-14323

Anti-cancer agent for
non-small cell lung cancer• Concluded a license agreement with Delta-Fly Pharma
and acquired exclusive marketing rights in Japan• Analyzing phase 2 data to prepare for phase 3

Calvanα1β1 blocker
for Huntington’s disease• Licensed to SOM Biotech SL (Spain), completed phase 2a
trial, and presented the data at a conference in October2021

In addition to developing compounds identified throughexploratory studies conducted both at our drug discovery
research laboratories and with collaborating research
institutions, we have been expanding our pipeline by inlicensing drugs concerning which we both possess
extensive expertise and expect to generate synergies withexisting pipeline products.

2. In-house Development Pipeline(1) NC-2800, a δ opioid receptor agonist for anxiety
and depression
NC-2800 is a chemical compound with strong potential
as an antidepression and antianxiety treatment that theCompany discovered through collaborative study with the
University of Tsukuba, Kitasato University, and the National
Center of Neurology and Psychiatry.
The Japan Agency for Medical Research and Development(AMED) selected this compound for its industry–academia

14

Development by licensees

Item

1. New Drug Pipeline

Nippon Chemiphar Corporate Report 2023

Phase 3Development through alliances

Notes

collaboration program in 2015 and, with the agency’s support,
we conducted preclinical trials.
As a result, the compound received high acclaim for its
potential as a therapeutic drug candidate.
In 2018, AMED’s CiCLE project* selected it for publicfunding and support, with which a phase 1 trial was started
in July 2021. In June of that year, we had concluded acollaborative research and development agreement andan option agreement for NC-2800 with Sumitomo PharmaCo., Ltd.
While each year sees more patients with mooddisorders, such as depression and anxiety, only about 40%of the patients are satisfied with the drug treatment theyreceive. NC-2800 is expected to be a first-in-class drugwith an excellent balance between safety and efficacy, andminimal impact in terms of side effects.
* Project name: Development of innovative mood regulators activatingδ opioid receptors.
Period: From March 30, 2018 to March 31, 2028.

Pharmaceutical Products(3) NC-2500, an XOR inhibitor; NC-2700, a URAT 1 inhibitor
for gout, hyperuricemia• NC-2500
It should be noted that current drug therapies for loweringuric acid pose a risk of causing an acute attack of gout,due to the sharp decrease in uric acid levels. However, in
NC-2500 phase 1 trials, we confirmed its unique property
to lowers blood uric acid levels gradually, suggesting it
may rectify this issue. In February this year, we signed alicensing agreement with a Chinese company, which is
working to develop the drug in China. (See box below).
In addition, preliminary data indicates that NC2500 is effective against neurodegenerative disorders
such as Alzheimer’s disease. So we are exploring thepossibility of expanding the application of NC-2500 to
include such disorders.

■ Mood disorders(Cases)
2mn

1.5mn

1mn

Satisfaction rate withpharmacotherapy

0.5mn

40.8%

0

1999

2002

2005

2008

2011

2014

2017 2020

Source: Annual Health, Labour and Welfare Report2020 (Calculation method changed in 2020).
Satisfaction rate announced by the Office ofPharmaceutical Industry Research in November 2021.

(2) NC-2600, a P2X4 receptor antagonist for neuropathic
pain and chronic coughIn joint research with Kyushu University, we havedeveloped a new drug candidate to treat neuropathic
pain. Since FY2012, the Company has been carrying out
research and development with the support of the Japan
Science and Technology Agency, taken over by AMED in
FY2015. With the support of AMED, we completed phase 1
trials in FY2017.
In FY2020, we added chronic cough to the primary
indications of the compound. While moving to enhance
its value by collaborative research for various indications,
we have been conducting out-licensing activities of thecompound to domestic and overseas companies.

• NC-2700
This is a new chemical compound that, unlike NC-2500,
promotes the excretion of uric acid from the body byinhibiting the transporter URAT 1, which is responsible forthe re-absorption of uric acid by the kidneys.
Non-clinical studies have shown that NC-2700
facilitates the excretion of uric acid but ameliorates aciduria,
thereby helping to prevent kidney damage and kidneystones, which are concerns when uric acid is excreted.
We seek to out-license the compound to domestic andoverseas companies.

3. In-licensing Pipeline(1) DFP-17729, a cancer microenvironment improving agent
for pancreatic cancer
In March 2020, we concluded a licensing agreement for
DFP-17729, with Delta-Fly Pharma.
DFP-17729 is expected to generate groundbreaking
therapeutic effects for refractory cancer by alkalizing
the acidic environment around tumors, that facilitates
cancer growth.
Delta-Fly Pharma is developing this for end-stage
pancreatic cancer and completed phase 2 trials in FY2022.

Licensing Agreement for NC-2500 in China
In February 2023, we signed an exclusive licensing agreement with Nanjing Neiwa Faith Pharmaceutical Co., Ltd.
(NF) for it to develop, manufacture, and sell NC-2500 for gout and hyperuricemia in China.
The onslaught of industrialization and urbanization, together with the aging of the population, have caused anincrease in lifestyle-related disease in China. Thus, the number of gout patients is expected to grow.
Since the agreement allows us to deploy to other regions the expertise that NF acquires through in-country
development, we will do all we can to maximize the compound’s value.

Nippon Chemiphar Corporate Report 2023

15

In this study, DFP-17729 was administered together
with chemotherapies, and was compared with the use of
chemotherapies alone in over-all survival. Data analysis
for efficacy and safety is underway to prepare for the next
phase of trials.
☞ Please refer to page 13 for DFP-17729.
(2) DFP-14323, an anti-cancer agent (non-small cell lungcancer)Lung cancer is the fourth-most common cancer by site bothin men and women.
A National Cancer Center Research Institute survey*
shows that, in 2019, some 120,000 cases were diagnosed
as lung cancer in Japan. In 2022, lung cancer caused
76,000 deaths in Japan, which is the highest number by site.
In March 2022, we concluded a licensing agreementwith Delta-Fly Pharma for DFP-14323. The substancetargets epidermal growth factor receptor (EGFR) mutationpositive non-small cell lung cancer.
Previous studies have suggested that DFP-14323
strengthens the immune response of cancer patientsby binding to aminopeptidase N, which is found on thesurface of cancer immunocompetent cells. In this way,
the substance reduces the dose required of standard
anticancer drugs, and enhances their efficacy without
increasing the side effects. That makes DFP-14323 a
promising therapeutic agent, especially for late-stage andelderly cancer patients.
Phase 2 trials for EGFR mutation-positive non-small celllung cancer at stages 3 and 4 have been completed. The
results were presented at the American Society of ClinicalOncology meeting held in June 2022. Preparation to startphase 3 trials is currently underway.

4. Repositioning of Existing Drugs
As long-listed drugs have been used over many years
in clinical practice, much expertise exists regarding theirsafety and use.
Further, the experience and research of medical
professionals indicate that some of these medicines may
have efficacy for other than the original indications. As
with new medicines, development for diseases for which
there are currently no particularly effective medications
is awaited.
To discover new uses for our long-listed drugs, weare supporting research in Japan and abroad. In Europe,
Spain-based SOM Biotech is developing our Calvan tabletsfor Huntington’s disease and other conditions. Its phase 2a
trial results were disclosed at an academic conference in
October 2021.

5. Access to New Technologies
To create further promising pharmaceutical productcandidates, we must use innovative drug discovery
methods by adopting innovative information technologies
and using AI. In fiscal 2022, we set up an AI promotion
office within our drug discovery research laboratories.
We had concluded capital and business alliances with
MOLCURE Inc. (in November 2018) and SUSMED, Inc.
(August 2020) with the primary aims of applying newtechnologies, raising reproducibility associated withthe creation of promising drug discovery themes, andimproving the speed and efficiency of development.
Through these agreements we are developing collaborative
efforts to support specific themes.

* National Cancer Center Research Institute, Cancer Statistics in Japan 2023.

■ Final Progression-free Survival (PFS) Report
The median PFS in phase 2 trials of DFP-14323 with 20
mg/day of afatinib: 23.0 months.
* Although the standard dose of afatinib is 40 mg/day, a halfdose was administered in the trials.

■ Collaboration with partners expected to speed up andstreamline drug discovery processes
Search for and Optimization Non-clinicalidentify targets
tests

Clinical tests Manufacturing
approval

For reference
Afatinib 40 mg/day phase 3 median PFS: 11.1 months
Osimertinib 80 mg/day phase 3 median PFS: 18.9 months
Key Selection Criteria• Non-small cell lung cancer• Stage III/IV or postoperative recurrence• Common EGFR mutations (Del 19 or L858R)• Performance status 0–2• No prior systemic chemotherapy or deﬁnitive thoracic
radiotherapy

16

Nippon Chemiphar Corporate Report 2023

MOLCURE Inc. is a unique
pharmaceutical AI drug
venture company thatdesigns pharmaceuticals
using proprietary AI
algorithms and anext-generation sequencer.
It conducts testing using its
antibody library or by
combining automated robot
technologies.

SUSMED, Inc., is an
R&D-oriented company
which has patents for
medical applications andblockchain networks usedin the medical field.

Pharmaceutical Products

IV Diagnostics Business
Our products are making a substantial contribution at atime when a growing number of people are suffering fromallergic and lifestyle-related diseases. By delivering speedy
test results, the products make possible early diagnosis
and the compilation of appropriate treatment plans. We willcontinue to develop and sell clinical testing equipment andreagents to meet the needs of both medical institutions andpatients, thereby supporting future healthcare. Further, weare conducting marketing activities designed to expand ourbusiness both in Japan and overseas.

1. DropScreen
Together with Riken, a large national scientific research
institute in Japan, Nippon Chemiphar has developed
the DropScreen specific IgE measuring kit ST-1, a
new extracorporeal diagnostic kit that combines theCompany’s allergy measurement reagent technologies
with screening systems based on microarray technologies
researched by Riken. We launched sales of the kit inFebruary 2020. In FY2022, we resolved the domestic
market penetration bottleneck by ramping up productionof reagents. We will continue to accelerate deployment of
the kit in Japan and abroad.

discomfort experienced by individuals undergoing smallvolume blood sampling, and the need for greater familiarity
regarding allergy screening.
This breakthrough diagnostic kit, which can be installedin small spaces, can screen for 41 allergens in just 30
minutes using only a single drop (20 microliters) of blood(whole blood, blood plasma, or blood serum), making
it possible for those being tested to obtain test results
quickly. Using it for children and those with an aversion tosyringes is ideal, since whole blood samples can be takenfrom fingertips. Due to these features, it is highly regarded
by a wide range of clinical departments, including thosespecializing in the treatment of allergies. Traditionally,
allergy testing primarily has been outsourced to third
parties. However, with DropScreen, we are cultivating a newmarket for in-house allergy testing.

2. Launched Sales of New Models of
Glycohemoglobin Analyzers

In September last year, we began selling the new
HLC-723 GR01 automatic glycohemoglobin analyzer,
developed by Tosoh Corporation. It provides moreaccurate results than the previous model, but
measurements at a similarly high speed.

Product characteristics
The DropScreen kit was developed bearing in mind theHLC-723 GR01

Specific IgE measuring kit ST-1

Measuring device A-1

Further Development of DropScreen
DropScreen A-1’s compact exterior belies its complex inner structure. Due to this complexity,
designing the product was challenging, and right up until the time of shipment we had toaddress a wide variety of minute details. These included part placement, proper achievementof light shielding in the product’s camera section, and adjustment of mechanisms associatedwith the mixing of sample specimens and fluids.
DropScreen A-1’s features have evolved as it has permeated the market, and we arecommitted to further improving the quality and stability of this product. In collaboration with
Nippon Chemiphar, we will apply the expertise we have accumulated through its development
to creating a succeeding model.

Hironobu Takahashi

Executive Officer, Operational Headquarters Deputy Manager
and Marketing Department Manager,
Ueda Japan Radio Co., Ltd.

Nippon Chemiphar Corporate Report 2023

17

V Overseas BusinessAs demand for prescription drugs grows, securing
production capacity is critical for manufacturers. Further,as the business environment becomes increasingly
severe, due to such factors as repeated NHI drug pricerevisions, manufacturing costs must be reduced if
business is to be sustainable.
To address these issues and maintain growth, weestablished Nippon Chemiphar Vietnam Co., Ltd. (NC-VN)
in March 2015. In addition to enhancing manufacturing
capacity, and reducing costs at its factory in Vietnam, NCVN is developing sales channels in several countries, which
will serve as stepping stones to overseas markets, primarilyin Asia.

1. Manufacturing
Having worked to expand manufacturing capacity, reduce
costs, and expand overseas, NC-VN began commercial
production for the Japanese domestic market at its factoryin November 2018. Once the factory in NC-VN achievesnormal operating levels, production costs are likely to be
20–30% less than manufacturing in Japan.
Gradually, we have been expanding the number of
products manufactured at NC-VN. Our focus has beenon items with strong cost advantage potential and, as of
May this year, we are manufacturing eight products there.
Responding to supply shortages in Japan, we strengthened
our manufacturing capabilities in FY2022 by switching totwo-shift operations at the NC-VN factory. We will continue
to use the factory to cut manufacturing costs, strengthen
manufacturing capacity, and improve our competitiveness in
the generic drug market.

(2) Business expansion in China
In China, online medical consultations have spread rapidly
due to the COVID-19 pandemic. In parallel, the number ofprescriptions for our Calvan tablets is increasing, with online
hospitals having started to prescribe the product last year.
In May 2023, we obtained approval for Epinastine
tablets. It is the first Japanese-made generic drug that has
undergone local bioequivalence testing and has cleared
the latest Chinese pharmaceutical regulations. We arepreparing to make our first shipments later this fiscal year.
In Hong Kong, all public hospitals have beenprescribing our cilostazol tablets since 2017 and, since wehave won bids for the next three years, sales will continue
through 2026.
We are currently applying for approval of one genericdrug in China. Our plan is to steadily generate results inthat country, through development of licensing business bytransferring technology to local companies.
(3) Joint project with International Finance Corporation
In March 2022, we concluded an advisory agreement with
the International Finance Corporation (IFC), a member ofthe World Bank Group, concerning studies targeting the
local marketing of generic drugs in Asia, the Middle East,
and Africa.
Utilizing the IFC’s advice and network, we are now
narrowing down potential countries and partners. Together,
we will both work to ensure that people in emerging markets
have access to affordable, high-quality medicines, andexpand in ASEAN markets and beyond.

2. SalesWe are working with local distributors to sell our proprietaryproducts and generic drugs in Thailand, China (including
Hong Kong), Vietnam, and South Korea. As of May 2023,
we have marketing approval for seven products, which areon the market in those four countries. We have applications
under review for three products in two countries, and plan
to increase the number of target countries and products.
(1) Application and approval status in Vietnam
Last July, we applied for approval for a product with anadministration and dosage different from that in Japan. In
addition, we received approval for Rebamipide tablets in
December. This is the first time that an oral drug—alreadyapproved in Japan and manufactured in Vietnam—has
gained approval for sale in Vietnam. We are preparing forthe market launch within this year.
Further, we are considering using our Vietnam factory
to expand our market to neighboring countries and regions.

18

Nippon Chemiphar Corporate Report 2023

Chemiphar and IFC members at Vietnam factory

Pharmaceutical Products

VI Management Strategy: Roadmap
Timeline of activities leading to achievement of our three plus 1 principal goals.

Item

Generics

Activity
Launch value-added
generics and introduce
products from othercompanies

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

Aim to launch two or more value-added products per year

Increase our production capacity from 1.6 billion pills (FY2022) to 1.9 billion pills (FY2025)

Expand domestic market to 2,000 kits in FY2025. Seek to achieve continuous business expansion bycreating new series of measuring reagents

Diagnostics

Expand sales of
DropScreen

Sequential launch in Europe,
the Americas and Asia
Create new version of equipment for domestic market andadditional reagents for abroad

DFP-17729
anticancer agent

Alkalizer

Phases 1 and 2 forpancreatic cancer

PMDA
consultations

Functional foods

Launch four products during
FY2022–2025

Examine potential for CKD-related indications,move to clinical phase

Licensee company willconduct phase 2b and3 trials

Licensee company in China is developing this as atreatment for hyperuricemia and gout
Continue licencing activity for other indications

NC-2600: Pursue out
licensing for multiple
indications

license for chronic cough and contribution toearnings through milestones

NC-2700: Continue out
licensing activities

Contribute to earnings through out licensing

DFP-14323: Develop
anti-cancer agent

Conductphase 2

Discover newcompounds using AI

Search for and identify targets,
optimize new compound

From export to local
development andproduction

Application,
approval, andlaunching

Sequentially launch other health-related products

Agreements
with
Conduct phase 1 and 2a trials in accordance with
Sumitomo AMED’s CiCLE program
PharmaNC-2500: Pursue out
licensing for otherindications

Overseasbusiness

Application,
approval, andlaunchingConsider expanding
applications to include
chronic kidneydisease-related indications

NC-2800: Conduct
phase 1 and 2a trials;
out-license

Drugdiscovery

Evaluation andpreparation /Phase 3

Evaluation andpreparation

Application,
approval andlaunchPhase 3

Preclinical phase/
License out

ASEAN and China: Will sell eleven products tofive countries by FY2025
Middle East and Africa: Will lodge multiple
applications for approval by FY2025

Discover new compounds
using new methods

Ongoing efforts aimed at expanding our productlineup and the number of countries in whichthese products are soldNippon Chemiphar Corporate Report 2023

19

ESG Initiatives for a Sustainable Society

Since the Corporate Governance Code, most recently revised inJune 2021, includes provisions concerning sustainability, corporate
and individual efforts to achieve a sustainable society haveaccrued greater importance. As a result, the Nippon Chemiphar
Group will promote initiatives to address environmental, social,and governance (ESG) issues related to its business activities.
In this way, the Group will attain both the Sustainable
Development Goals adopted at the UN Summit in September
2015, as well as recommendations made by the Task Force on
Climate-related Financial Disclosures, an international body thatmonitors, and makes recommendations about, the global financial
system in order to promote international financial stability. To
facilitate our initiatives, in December 2021 we formulated a Basic
Sustainability Policy and formed a Sustainability Committee,
chaired by our president and CEO.

Basic Sustainability Policy
Through its business philosophy to “make adifference in society by providing pharmaceuticaldrugs and health-related services to help people
become and remain healthy” and its business1. Basic Policies
We recognize the need to:(1) Minimize our footprint across all areas of business—
including in R&D, manufacturing, and sales—byefficiently using resources and energy, minimizing
waste, reusing, and recycling.
(2) Focus on environmental conservation.
(3) Release impartial, appropriate information about
environmental conservation to boost
corporate transparency.
(4) Make employees eco-conscious; teach them how toprotect the environment.

2. Environmental Conservation
Our Sustainability Committee devises, implements, andevaluates environment-related conservation initiatives
for the entire Group. Our steps to protect the global
environment are a Group-wide theme. In addition, we havelaunched a campaign to conserve electricity, and provide
in-house training to enhance awareness of environmentrelated activities.

activities, the Group is working to enhance its
Corporate Officers
Reports

corporate value and contribute to developing asustainable society.

I

Environment-related Initiatives

If society is to be made sustainable, we believe thatcompanies must consider the environmental impact of theirbusiness activities. Thus we ensure that our pursuits reduce
our impact.

20

Nippon Chemiphar Corporate Report 2023

Sustainability Committee(Devizes, implements, and evaluates
initiatives; reports to management)

Nippon Chemiphar

Safety ResearchInstitute for
Chemical Compounds

Nihon PharmaceuticalIndustry

Nippon Chemiphar
VietnamJapan Sopharchim

ESG Initiatives for a
Sustainable Society

3. Impact of Group Operations(For the period from April 1, 2022 to March 31, 2023, for the Nippon Chemiphar Group)

Items Used for Our Business Activities● INPUTINPUT
EnergyFY2021

FY2022

Electricity

17,605kWh18,501kWh+5.1

Gasoline

330kl

334kl

+1.4

Heavy oil

94kl

99kl

+5.4

Light oil

279kl

273kl

(2.2)

Kerosene

742kl

826kl

+11.3

2t

2t

+4.4

Town gas279,303Nm3

273,357Nm3

(2.1)

Total

240,992GJ

252,865GJ

+4.9

LPG

Energy Used

YOY (%)

Resource
Water (consumption by factories, laboratory)
Tap water

34,410m3

33,833m3(1.7)

Well water

100,062m3

95,649m3

(4.4)

Total

113,608m3

109,069m3(4.0)

Raw materials

754t

654t

(13.3)

Packaging materials

227t

259t

+14.3

Total

978t

913t

(6.6)

Materials

(GJ)

26.42

250,000
241,747

252,865
235,184

240,992
20.92

22.25

200,000

25.00

228,788

20.40

18.64

20.00

150,000

15.00

100,000

10.00

50,000

5.00

0.00

0
FY

2018

2019

2020

2021

2022

Usage to total emissions to sales
and other activities

Amount of usage(gigajoules)● OUTPUTOUTPUT
Into Atmosphere
CO2 emissions
PRTR-related substances

YOY (%)(t-CO2)

12,116t-CO 2+5.3

15,0000.00t±0FY2021

FY2022

11,511t-CO 2
0.00t

PRTR-related substances

1.60
12,245As Industrial Waste Water (from factories, laboratory)
Used water

CO2 Emissions

40,516m3

43,772m3

+8.0

0.00t

0.00t

±0

10,000

11,20911,511

12,116

1.20
1.00

1.02
180t

153t

0.92

(15.1)

Industrial waste

216t

242t

+12.0

PRTR-related substances

3.00t

3.40t

+13.3

1.40

1.20

As Waste
General waste

11,774

0.90

0.81

0.80
0.60

5,000

0.40
0.20

RECYCLING
FY2021
Container andpackaging recycling

FY202230t

YOY (%)
37t

+24.8

0
FY

0.00
2018
Tons of CO2

2019

2020

2021

2022

Amount of total emissions to sales
and other activities

Note: The above tables and charts apply to the period from April 1, 2022 to March 31,
2023, for all Nippon Chemiphar Group offices.

Nippon Chemiphar Corporate Report 2023

21

II Medical Professionals and Patients
It is said that drugs cannot fulﬁll their proper roles unlessthey are used together with the appropriate information.
Bearing this in mind, we are quick to provide medical
institutions with accurate information about the proper use ofour drugs. We do this through our medical representatives(MRs), who are located nationwide.
At the same time, we collect information on quality andsafety, consolidate collected safety particulars, and provide
this to assist in creating new pharmaceutical preparations.

(3) Support Materials
For physicians and pharmacists, we publish a periodical
by means of which we share our latest information.
We also produce pamphlets that provide guidance on
nutrition-related and exercise therapies, as well as
health management.
Through these materials, we are doing our best to help
improve the quality of healthcare.
(4) Response to Inquiries SwiftTo ensure accurate and speedy responses to telephoneinquiries from medical professionals and patients, we havea customer support office that provides information on theappropriate use of our pharmaceuticals.

2. Strengthening Our Quality Assurance andSupply Systems

1. Initiatives to Ensure Proper Use of Drugs
We train our MRs to provide information and teach them
about the proper use and efficacy of our products. With
the patient always in mind, we strive to cultivate humanresources who can serve as members of team-based
healthcare for pharmacotherapy partners.
(1) Role of MRs
Nippon Chemiphar has some 200 MRs across Japan. It
strives to supply information promptly to medical institutions
through pamphlets and newsletters. To this end, we collectinformation on drug side effects; provide patient guidanceand consultation services on drug use; and disseminate
news about medical fee revisions.
In similar fashion, we are providing IT-based information
to help prevent the spread of the coronavirus.
We work to ensure the efficiency of our MRs throughties with medical institutions, particularly core hospitals thatare central to regional healthcare.

In recent years, the domestic pharmaceutical industry has
faced an urgent need to restore public trust in generic drugs,
due to such issues as quality-related improprieties having
been observed among several generic drugmakers. At the
Nippon Chemiphar Group, the Group Quality Assurance
Department, set up in April 2022, plays a central rolein examining issues; solving problems; proposing, thenimplementing, unified management standards and methods;
as well as further strengthening the entire Group’s level ofquality assurance.
In addition, to ensure a stable supply of pharmaceuticals,even during demand surges and natural disasters, we are
expanding our pool of API suppliers, carrying out capital
investments, and increasing our staff headcount.
☞ Please refer to page 12 for details regarding quality
assurance and stable supply.

3. Quality, Information ParamountWe are working on initiatives to ensure the quality of bothgenerics and proprietary products, as well as to provide
information more effectively. At the same time, we aredevising ways to improve the visibility and user-friendlinessof our products.

(2) Platform for Learning
The Company conducts seminars and has study groups
for various medical conditions, including dementia andlifestyle-related illnesses.
We provide medical professionals with the most up-todate information and opinions related to treatment.
Product Initiatives Aimed at Safety and Convenience
Improving Visibility and Convenience
Visibility

22

1. Matte press-through packaging
Reduced shine makes it easier to read the information written
on the aluminum backing of medication packaging.
2. Universal design font
For sheets of press-through packaging and outer packaging,
we use a font that is easily legible to prevent misreading.

Nippon Chemiphar Corporate Report 2023

Convenience

3. Tablet imprint
All tablets are scored on both sides, with thename of the drug and the maker printed on
the top and bottom half, respectively, on one
side, and the bottom and top half on theother side.

ESG Initiatives for a
Sustainable Society

III Community Participation
As members of local communities and society, we support
projects that beneﬁt the communities and society in which
our ofﬁces are located. Our aim is to grow, while being an
integral part of society.

1. Cooperation with Local Communities
Nippon Chemiphar’s Soka office conducts annual fire
drills, and in June 2022 it was awarded a certificate
of commendation by Saitama Prefecture’s Misato City
Fire Prevention and Safety Association for its rigorous
safety management, legal compliance, and exemplary
facility management.
In November of the same year, two employees from theSoka office received awards from Misato City, identifying
them as having contributed to the city’s development overmany years.
Nippon Chemiphar and Nihon Pharmaceutical Industry
Co., Ltd. made donations in December to Chikusei City,
Ibaraki Prefecture (the location of Nihon PharmaceuticalIndustry’s Tsukuba Factory) through the corporate versionof Japan’s hometown tax system. For a second consecutive
year, the donations helped the Western Ibaraki Medical
Organization to support projects.

3. Educational Support in Vietnam
Nippon Chemiphar Vietnam has set up a scholarship at
the University of Medicine and Pharmacy in Ho Chi Minh
City, southern Vietnam. The Nippon Chemiphar Scholarshipaims to support the development of human resources,
who will play a crucial role in the expansion of Vietnam’s
pharmaceutical industry by assisting students who haveexhibited excellent academic ability, but are struggling withfinancial challenges.
The Nippon Chemiphar Group will continue to support
human resource development in Vietnam and other
ASEAN members.

Nippon Chemiphar and university members in December 2022 at the
University of Medicine and Pharmacy, Ho Chi Minh City.

4. Recycling, Support for Developing Countries
We help developing countries through such activities ascollecting pet bottle caps, books and miswritten postcards.
In Japan, caps and books can be collected and sold torecycling companies, while postcards can be exchanged
through the postal service for money. Group companies
have been generating donations in this way since 2011.

Shinichi Kudo (center), president of Nihon Pharmaceutical Industry
Co., Ltd., holds a letter of appreciation he received at last year’s
presentation ceremony.

2. Volunteer Activities
We have established an in-house system of volunteer leavethat encourages employees to take part in volunteer
activities. These include social welfare initiatives andrescue efforts in disaster areas.
We support people with disabilities through donations
to Hands On Tokyo, the NPO which supports those withdisabilities among other activities.

Books donated by employees to raise funds fordeveloping countries.

Nippon Chemiphar Corporate Report 2023

23

IV Employees
The Nippon Chemiphar Group believes employee diversity
in terms of gender, gender orientation, nationality, workstyle,and values to be the cornerstone of corporate vitality andgrowth that leads to the enhancement of corporate value.
The Group is striving to create a corporate culture that
respects the individuality and talents of each employee.

Furthermore, recognizing that promoting the active
participation of female employees starts with the involvementin the childcare process, we set up the Papa Quota System.
It requires all male employees with children under two
years of age to take childcare leave. We expect the system
will help raise awareness regarding participation in thechildcare process. A minimum of five days’ childcare leaveis recommended under the system, with a maximum of fivedays’ paid leave.

2. Diversity Initiatives

1. Women’s Participation and Advancement
We hire women, promote women to management positions,and incorporate a variety of viewpoints and ways ofthinking in business management. We will continue tomake our workplaces enjoyable and the work fulfillingthrough the presence of hardworking female veteranemployees and managers, who serve as role models for
ambitious female colleagues.
Our support for participation by women involves efforts
to raise awareness among all employees. As an example ofour approach, we conduct surveys of employee awarenessand needs concerning the promotion of active participation
by women. Further, through the Company newsletter,
we inform staff about topics related to work–life balance;roundtable discussions held by female employees raisingchildren; and the activities of men who have taken childcare
leave. We formulated an action plan, based on the Act on
Promotion of Women’s Participation and Advancement in the
Workplace (See table below). We plan to continue our efforts
to create an organization that enables female employees andmanagers to take pride in their work.
(As of March 31, 2023)

Plan (April 1, 2022–March 31, 2023)

ResultHave women account for more than 10% of managers.

12.3%

Men who have taken childcare leave takepart in roundtable discussions.

24

Nippon Chemiphar Corporate Report 2023

We believe that employee diversity—including differences
in sex, gender roles, nationality, workstyles, and individual
values—provide foundations for company vitality andgrowth, thereby boosting corporate value. The Group is
working to create a corporate culture that draws on thevarious characteristics and abilities of its employees, while atthe same time promoting the participation and advancementof women in the workplace.
In response to an increase in business with companies
abroad, resulting from the establishment of the Vietnam
factory, we are recruiting—without regard for nationality or
gender—human resources highly specialized in our Group’s
strategic areas.
We are continuing to develop employment opportunities
for people with disabilities in order to provide a workplaceenvironment that is comfortable for everyone.

Some of the staff at the Vietnam factory

3. Mechanisms, Training Systems That Use
Employee Abilities

We provide employees with training and support systems,
tailored to different ages and types of work, in order toexpand their capabilities and develop next-generation
managers. We support our employees by conducting
performance-based evaluations; applying rating standards
that assess managerial ability; encouraging the acceptanceof challenges; establishing personnel systems that
accommodate a variety of workstyles to fit each employee’s
life stage; and promoting diversity. And to develop humanresources that can play an active role on the global stage, wesend researchers to university overseas, support employees
studying to earn an MBA, and subsidize the TOEIC test.

ESG Initiatives for a
Sustainable Society

Support to Increase Human Resource Capabilities
Rank-based Training• Leader training• Management training• Training for newly
appointed managers• Level-appropriate • Training for newly
training for team,appointed executives
section, and• Evaluator training
general managers

Support for Elective Education• Support for acquiring an MBA• Researcher education• Dispatch to management
team seminars

Personal Development• Correspondence education • Support for obtaining • External public• IT training
public certiﬁcations
lectures• TOEIC IP test

4. Employee Questionnaires;

Factory Mentoring Programs

To supply high-quality pharmaceuticals, it is essential
to foster a workplace culture that places top priority on
quality. We cannot strengthen our work system and foster aculture of quality without there being a mutually beneficial
relationship between personal and organizational growth.
To this end and to judge awareness of important issues,
NPI’s Tsukuba Factory regularly distributes questionnaires
to employees. A cloud-based system has been introduced
to simplify responding to questionnaires, as well as thecollection of completed documents and their analysis.
In FY2022, we put in place a mentor system in eachdepartment. It uses mid-career employees, who are well
positioned to provide employee guidance while at thesame time doing their work. To date, we have had a degreeof success with having directors act as mentors, holding
regular interviews and providing advice. Since last fiscal
year, we have been introducing a system of mentoring toseveral generations of factory employees.
As the voices of our employees are heard and theirissues made clear, we will continue to implement initiatives
to improve our organization.

5. Harassment Prevention and Mental HealthIn order to prevent our employees from being perpetrators or
victims either within or outside the Company, all employees
learn about sexual, power, and maternity harassment.
Company regulations prohibit sexual harassment and wehave a sexual harassment prevention manual. In addition, we
have in place internal and third-party hotlines for preventing,and improving responses to, various types of harassment.
Finally, we strive to maintain and improve employee
mental health by conducting yearly stress checks on all our
staff, and offering interviews and guidance conducted byphysicians to interested parties.

6. Supporting Work–Life Balance
In recent years, we have promoted work–life balanceby eliminating long working hours; having overtime-freedays; in principle prohibiting overtime after 8:00 p.m.;and facilitating morning overtime, should additional work
be necessary.
Since FY2021, we have made it easier for employees
to use paid leave, as well as reduce and manage overtime.
In addition, we have raised employee awareness regarding
workstyles and implemented ongoing follow-up efforts insupport of work–life balance. We have a variety of systems
that enable all staff to demonstrate their skills and, at thesame time, work in a comfortable environment.
The systems include flextime, which allows employees
to adjust their starting and finishing times according tooperational circumstances; a discretionary work system;
a comeback registration system that promotes thereinstatement of employees who have left the workplace
for such reasons as childcare, nursing care, or a change
in the workplace of their spouse; an employment contract
non-relocation clause, for employees who cannot movefrom their current place of work for reasons such as nursing
care or the workplace of their spouse; and a reemployment
system that allows senior employees to continue working
after retirement.
We have adopted various approaches that take into
consideration each employee’s personal circumstancesand preferences. When we select a work environment forour staff, we ensure that they can make full use of theirexperience and expertise.
Following the introduction of teleworking, staggered
working hours, and online conferences, we are continuing
our efforts to protect our stable supply of pharmaceuticalproducts from disruption, while protecting the safety of
our employees.

7. Promoting the Use of Paid Leave
As part of our efforts to promote work–life balance, we
implemented a pre-registration system for 10 days ofannual paid leave that started in FY2021. The system
is based on the idea that employees should be lively,energetic, and focused not only in their work, but at home
and when pursuing their hobbies.
We believe that ensuring happiness in the private
lives of our employees will ultimately enable us toprovide better products and services. Accordingly, we
recommend that employees who make use of this preregistration system take consecutive days of paid leave
whenever possible.

Nippon Chemiphar Corporate Report 2023

25

V Management System
1. Corporate Governance(1) Underlying Philosophy
We take very seriously the managerial responsibilities withwhich our shareholders have entrusted us. Thus, we strive
to ensure that our management organization and operations
are appropriate. Our top priority is to guarantee thatmanagement is fair by making it as transparent as possible.
(2) Organization
To improve management efficiency and strengthen
corporate governance, we have separated the decisionmaking and supervisory functions from our businessexecution functions. The former have been delegated to
the Board of Directors (eight members with two-year terms),
at least one third (three members) of whose members areoutside directors; the latter functions are the purview of the
Corporate Executive Officers Meeting.
In addition, we have formed an Audit and Supervisory
Board comprising members who conduct rigorous and neutral
audits concerning the overall execution of duties performedby directors, executive officers, and other personnel. This
they do in part through active participation in meetings of theBoard of Directors and other key bodies within the Company.
The Audit and Supervisory Board comprises one full-time andtwo part-time (outside) members.
Our outside directors and outside Audit andSupervisory Board members satisfy the independence

standards stipulated both by the Tokyo Stock Exchange
and Nippon Chemiphar and, therefore, are not subject toundue influence from our Company.
As required by the Tokyo Stock Exchange, theCompany has notified the exchange that it has designatedits outside directors and outside Audit and Supervisory
Board members as independent officers.
At the same time, we are striving to strengthen ourinternal management system through risk management
and the development of in-house control systems. We
are promoting sound corporate activities and enhancing
our corporate governance in accordance with ourFundamental Internal Control Policy and Legal Compliance
Code of Conduct.
We expect these efforts to further strengthen the trustbased relationships we maintain with our shareholders andstakeholders, thereby enhancing our corporate value.
(3) Directors, Audit and Supervisory Board Members(a) Directors
Before appointing someone to our Board of Directors, wecheck to ensure they are of flawless character, and havethe appropriate insight and level of professional expertise,broad experience, superior ability, and deep sense of
responsibility (please refer to the skills matrix on page 27).
They must also display advanced professional proficiency,
and thorough knowledge of the Board’s efforts to enhance
corporate governance while generating Group-widebusiness value in accordance with the Innovation Roadmap.
Candidates for the position of inside director are
reviewed to ensure that their performance and managerial

Management Organization
General meeting of shareholders
Election anddismissal
Remuneration Advisory
Committee

AdviceBoard of Directors

Requests

Reports
Reports
Sustainability Committee

Risk Management Committee

Election anddismissal
AuditsReports
Selects,
dismisses,
andsupervises Reports

Audit and Supervisory
Board members

Audits Cooperation
and reporting

Promotes

Oversees

Reports

Corporate Executive
Officers Meeting
Reports

Instruction andsupervision

Departments and Group companies

26

Nippon Chemiphar Corporate Report 2023

Reports

Independent
auditorPresident
Instruction and Reports
supervision

Election anddismissal

Internal auditing divisionInternal audits

AuditsESG Initiatives for a
Sustainable Society

ability are excellent, that they have fulfilled their operational
responsibilities thus far, and that they are able to observe
the Company’s operations from a broad perspective.
Meanwhile, candidates for the position of outside
director must meet the independence standards stipulated

both by the Tokyo Stock Exchange and our Company.
Candidates for the post of director are selected by thepresident and CEO and, following approval by the Board, areappointed to their positions in line with annual shareholder
meeting resolutions.

Director Experience and Expertise (skills matrix)
Current Position(as of June 2023)
Kazushiro Yamaguchi President and CEO
Director and Senior
Masanori Kutsuwada Managing
Corporate Officer
Director and Senior
Tomio Yamakawa
Managing
Corporate Officer
Director andMasahide Yasumoto Managing
Corporate Officer

Corporate
Management

R&D/
New Business

Sales/
Marketing

√

√

√

√

Overseas
Business/
International
Experience

Intellectual
Property

√

√

√

√

√

√

Legal/Risk
Management

Financial
Affairs/
Accounting/
Financing

√

√

√

√

√

√

√

Koki Hayamizu

Director andCorporate Officer

Yuji Harada

Outside Director

Masaki Yoshino

Outside Director

√

v

√

Naoko Omukai

Outside Director

√

v

√

√
√

√

√

√

√

(b) Audit and Supervisory Board Members
Before appointing an Audit and Supervisory Board member,
we closely examine the candidates and select an individualof excellent character and insight, with a high level ofprofessional expertise, wide-ranging experience, superior
abilities, and a deep sense of responsibility.
A candidate for the post of inside Audit and Supervisory
Board member is evaluated to ensure that they are wellversed in our operations and have the aptitude necessary
to audit the appropriateness and level of propriety of ourdirectors as they perform their duties.
A candidate for the post of outside Audit
and Supervisory Board member must meet theindependence standards of both the Tokyo Stock
Exchange and our Company.

Nippon Chemiphar Corporate Report 2023

27

(4) Director Compensation
The maximum amount of remuneration for the Company’s
directors is determined by a resolution of the General
Meeting of Shareholders. Each director’s base remuneration
is determined by the president and CEO according to
Board of Directors’ proxy resolutions in compliance with
the Company’s Compensation Determination Policy. This
policy was shaped by our Board of Directors and can besummarized as follows.

Subsequently, the Board consults with the Compensation
Advisory Committee to ensure that the president and CEO’s
decisions comply with this policy, and later receives a reportdetailing the committee’s response.
The Board determines the number of shares to beawarded each inside director as share-based remuneration.
This follows a review of the Compensation Advisory
Committee report with recommendations for the appropriate
ratio of an inside director’s compensation (fixed monetaryand non-monetary) relative to general compensation.

Compensation
Type

OutlineBase
compensation

A fixed, monthly, cash remuneration the amount of
which reflects the recipient’s position, responsibilities,
and years in office. It is based on the Company’sbusiness results, and evaluations of the individual’sbusiness performance.

Non-monetarycompensation

The Board shall determine the appropriate details, size,
and amount of stock-based compensation that isprovided as an incentive to some or all inside directors
to promote management that will sustainably enhance
corporate and shareholder value by improving theCompany’s business performance. The Board shallalso reveal how stock-based compensation is
calculated, the timing and conditions according towhich it is to be granted, and other relevant matters.

(a) Basic Policy
The Company’s basic policy for determining individual
director compensation is to set said compensation at levels
commensurate with the responsibilities of the director inquestion, while also considering the role of compensation
as an incentive for promoting management targetingsustainable growth in corporate and shareholder value
through improved business performance.
Specifically, inside directors receive both monetarycompensation (base compensation) that is fixed, in addition
to non-monetary compensation that is not fixed. Outside
directors receive only base compensation.
(b) Composition
Inside directors’ compensation comprises a fixed monetaryamount plus non-monetary compensation that is determined
relative to their general compensation. They are allotted optimal
percentages to ensure that their compensation serves as anincentive to focus on improving business performance, and soenhance corporate and shareholder value. The percentages
are determined based on a director’s position, responsibilities,
and tenure; the Company’s performance; employee salarylevels; and compensation levels at companies of similar size
and in comparable industries or business categories.
Outside directors, meanwhile, receive only basecompensation, in the form of fixed monetary remuneration.
(c) Method of Determination
Reflecting resolutions adopted by the Board of Directors,
the president and CEO decides the details of each director’sbasic compensation according to our Compensation
Determination Policy.

28

Nippon Chemiphar Corporate Report 2023

(5) Remuneration Advisory Committee
The Company set up the Remuneration Advisory
Committee as an advisory body to the Board of Directors.
The committee comprises three members, two of whom are
independent outside directors.
(6) Compensation of Audit and Supervisory Board Members
The maximum amount of total compensation for Audit andSupervisory Board members is determined by a resolutionof the General Meeting of Shareholders. Meanwhile, themembers of this board meet to decide the amount ofcompensation each member shall receive.
(7) Evaluating the Board’s EffectivenessTo evaluate the overall effectiveness of the Board of
Directors, we deliver self-evaluation questionnaires
each year to all Board and Audit and Supervisory Board
members. The data compiled from the responses is thenanalyzed and discussed by the Board. In FY2022, it was
found that the Board, on the whole, had been effective.
We will continue to analyze and evaluate the Board’s
effectiveness in a bid to increase it, while taking the steps
necessary in areas needing examination or improvement.
Main Meetings, Attendance during FY2022
Board ofDirectors’ Meeting(attendance rate)

Audit andSupervisory Board
Meetings (attendance rate)

Outside directors

12 times (100%)—

Outside auditors

12 times (100%)

16 times (100%)

ESG Initiatives for a
Sustainable Society

2. Internal Controls and Risk Management(1) Internal controls
We have established a Fundamental Internal Control
Policy based on the Companies Act and the Regulation
for Enforcement of the Companies Act. In addition, we
have set up a framework that ensures our operations areappropriate in terms of risk management compliance, theefficient performance of professional duties, and reliablefinancial reporting.
Further, we have created an Internal Auditing Division,
which operates under the direct supervision of thepresident and CEO. This division cooperates with various
committees, including the Risk Management Committee,
to investigate the appropriateness of our operations andsuggest improvements.

(2) Risk management
In accordance with our Fundamental Internal Control Policy,
we have established a set of risk management rules to foster
comprehension, management, and response to a variety
of risks that have significant impact on the administration of
our businesses.
The rules include provision for the creation of a Risk
Management Committee, with the director in charge of risk
management serving as its chairperson. We also have
set up individual committees to respond to risks related
to compliance and information security, and are sharing
relevant information with our employees.

Business and Other Risks (presented in securities report)

Business strategy risks☆ Changes to the NHI drug price and medical insurance
systems, and regulations and law governing
pharmaceutical affairs☆ Pharmaceutical R&D
Prolonged time required to develop new and generic drugs;
suspension or cancellation of such development.

☆ Excessive competition among generic drugs☆ Litigation-related risks
Proceedings regarding product liability, environment, labor, andother matters.
Patent lawsuits filed by manufacturers of original pharmaceuticals,
despite thorough preemptive investigation of patents.

☆ Fluctuating financial markets, exchange rates, andincrease in raw material prices☆ Overseas risks
Political instability in countries where we operate;
deterioration of economic conditions or other relevant
circumstances; violation of laws, regulations,administrative guidance, or other directives; andlabor–management conflict.

Risks posed by natural disasters and accidents☆ Delayed, interrupted material and product procurement
Regulatory issues at supplier companies or countriesof manufacture; disasters such as earthquakes andfires; accidents during transportation.
☆ Spread of infectious disease
COVID-19 and other illnesses.

☆ Risks related to legal violations, corporate governance☆ Delayed, interrupted production
Resulting from technical or regulatory issues; fires, earthquakes,
and other disasters.
☆ Drug quality-, safety-related issues☆ Unexpected medicinal side effects☆ Trouble involving IT systems☆ Information leaks

Impact on operating results or financial position

External environmental risks

Nippon Chemiphar Corporate Report 2023

29

3. Directors, Audit & Supervisory Board Members, and Corporate Officers (as of June 21, 2023)(Back row, from left)
Outside Director Masaki Yoshino, Yuji Harada and Naoko Omukai; Director and Corporate Officer Koki Hayamizu(Front row, from left)
Director and Senior Managing Corporate Officer Tomio Yamakawa; President and CEO Kazushiro Yamaguchi; Director andSenior Managing Corporate Officer Masanori Kutsuwada; Director and Managing Corporate Officer Masahide Yasumoto(From left)
Audit & Supervisory Board member (full-time)
Sakaru Makino, Outside Audit & Supervisory
Board members (part-time) Rumi Yamaguchi andNaoshige Shindo

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Nippon Chemiphar Corporate Report 2023

(Back row, from left)
Corporate Officers Fumio Tangiku and Takahiro Mataki(Front row, from left)
Corporate Officers Shinji Nakajima, Shinichi Kudo, andHirofumi Miyata

ESG Initiatives for a
Sustainable Society

4. Messages from Outside Directors
Experience and knowledge contribute an external perspective

Yuji Harada
Outside Director

Nippon Chemiphar has co-opted generic drugs, the use of alkalizing agents, and new drug
discovery into its basic management strategy and, by applying this master plan overseas, it isworking to ensure the sustainable development of the Group. It is a deeply earnest company
that works diligently from the top down, with the entire Company united in ambitiously
undertaking the challenge of innovation.
The environment surrounding the pharmaceutical industry remains extremely challenging.
This is due to a series of scandals involving generics manufacturers that have resulted insupply shortages; yearly drug price revisions; and sharp hikes in raw material and energy
costs. A constant effort is needed to solve these and related problems.
The role of outside directors is to provide management with advice and supervise
corporate governance in order to help improve corporate value. Throughout my career, I
have observed a range of different companies, having been involved in the management offinancial institutions, think tanks, and automobile manufacturers.
I hope to put to good use what I have learned from my working background by focusing
on providing advice that may help find a solution to the challenges facing the industry. Since
the work of pharmaceutical manufacturers affects not only people’s health, but also their lives,
I believe that it is essential that operations be carried out in an orderly manner and guided bysolid governance.
A look at recent corporate scandals reveals that there have been many incidents
stemming from longstanding practices and the failure to do what is right. Hence, regardless ofindustry, I treat company misconduct as an object lesson and advise that governance should
be under constant scrutiny.
The Nippon Chemiphar Board of Directors operates most effectively. But, while
explanations are provided in advance and untoward incidents are reported promptly, I believe
it is necessary to keep a close eye on the situation at the execution level. For this reason, I
make it a rule to check the materials and minutes of corporate officers’ meetings, since it isthe executive-level, decision-making body. If necessary, I even refer to the officers in charge
to get a full understanding.
Nippon Chemiphar’s major strengths are its strong leadership and accurate, swift, andbold decision-making. That said, since it is a listed company with general shareholders, it
must have a strong governance system. Since it is the critical duty of an outside director toeffectively harmonize these two attributes, I intend to leverage my perspective as an outside
third party to provide advice and contribute to the Company.

An outside director in an era of change

Masaki Yoshino
Outside Director

I have practiced law for 28 years, and have served as an outside director of Nippon
Chemiphar for four years. Before taking up my role with Nippon Chemiphar, I served as anauditor and outside director at several other listed companies.
The Company, with a management philosophy that pharmaceuticals should be at theheart of comprehensive healthcare, is making significant contributions to society. My role aspart of that is to assume an independent standpoint, receive reports on business execution,
ensure the Company philosophy is fully exercised, and check whether there are any
inappropriate areas of business execution.
As an attorney, the first thing I look at is the legality of business execution, and the partit plays in corporate culture. I have found that Nippon Chemiphar places top priority on thelegality and appropriateness of its business execution, as well as on having thorough quality
control. As an outside director, I can see no problems.
Meanwhile, Japanese society is also undergoing change. Not only corporate laws, butalso corporate governance codes are constantly being revised, while the public’s attitude tocompanies is constantly changing. The UN’s SDGs and the concept of diversity and inclusion,
barely known just 10 years ago, are now taken for granted as corporate responsibilities. It is in
this context that I provide supervision and advice from an outside perspective, to enable theCompany to respond appropriately to society’s new demands.
Nippon Chemiphar has cultivated areas of business that have seen significant growth,such as alkalizing and the DropScreen kits, and the Group has potential for further overseas
expansion. In my role as an attorney, I have substantial experience doing business with nonJapanese companies, and wish to provide support at that level as well.

Nippon Chemiphar Corporate Report 2023

31

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Nippon Chemiphar Corporate Report 2023

ESG の取り組み

企業情報

Corporate Data
34

I. Ten-year Consolidated Performance Overview

34 II. Analyses of Operating Results andFinancial Position
36 III. Corporate Data
36 IV. Domestic Locations
36 V. Group Companies
36 VI. History

Nippon Chemiphar Corporate Report 2023

33

I

Ten-year Consolidated Performance Overview
FY2013(Ended March 31, 2014)

FY2014(Ended March 31, 2015)

FY2015(Ended March 31, 2016)

FY2016(Ended March 31, 2017)

31,89335,11835,60235,68930,77334,16834,50934,551

Generics

24,291

27,74928,85729,294

Proprietary products and new drugs

4,277

3,374

2,888

2,294

1,119

949

1,092

1,137

Cost of sales

15,12818,35218,803

19,449Selling, general and administrative expenses

13,437

13,48013,653

13,403R&D expenses

1,668

1,755

1,889

1,984

Operating profit

3,327

3,285

3,145

2,836

Ordinary profit

3,206

3,217

2,945

2,849

Profit attributable to owners of parent

1,887

1,899

1,961

2,054

Total assets

40,106

41,42843,64447,002

Total net assets

13,501

15,626

16,041

17,355

Operating activities

1,892

2,438

2,450

2,737

Investing activities(2,499)(2,072)(151)(2,504)

Financing activities

(205)

(137)

(935)

787

Capital expenditure

3,366

1,710

1,172

2,928

Net sales
Pharmaceutical products segment

Diagnostics1

Income Statement

Financial position at year end

Cash flow from

Capital expenditure and otherAmounts per share2

Indexes

Others segment

Depreciation and amortization

862

1,200

1,178

1,112

Earnings per share (¥)

461.97474.49499.12530.02

Book value per share (¥)

3,369.70

3,900.05

4,099.74

4,548.80

Dividends per share (¥)

100.0

100.0

100.0

100.0

EBITDA (millions of yen)

4,252

4,588

4,280

4,104

Operating income to sales (%)

10.4

9.4

8.8

7.9

Return on equity (%)

14.6

13.1

12.4

12.3

Return on assets 3 (%)

8.5

7.9

6.9

6.3

Debt-to-equity ratio (%)

89.7

80.1

81.1

85.3

Equity ratio (%)

33.6

37.7

36.7

36.9

Dividend payout ratio (%)

21.6

21.1

20.0

18.9

Number of employees

699

743

756

769

Notes:
1. We have disclosed sales of diagnosistics since FY2021.
2. As we conducted a 10 :1 reverse stock split on October 1, 2016, per share data have been adjusted as if the split had been conducted at the start of FY2013.
3. Return on assets = ordinary profit / [(total assets for the previous term + total assets for this term) / 2].
4. Announced on May 12, 2023.

II Analyses of Operating Results and Financial Position for FY2022
I. Summary of FY2022 Business Results

1. SalesLooking at the Pharmaceutical Products segment, ingeneric pharmaceuticals, we responded to substitutedemand stemming from quality issues at our competitors,
while sales of products launched in recent years werealso strong. However, in addition to the impact of NHI
drug price revisions, we continued to have to makeshipment adjustments on some products, particularly
from 3Q onward, due to manufacturing capacity issues,
including products outsourced to other companies. In
addition, shipments of some products were suspended in
December last year to confirm manufacturing processes.
Sales of generic drugs ended up falling 5.6% YOY. Salesof proprietary products and new drugs also decreased
23.3% YOY due to the impact of NHI drug price revisions.
Meanwhile, sales of diagnostics grew 28.5% YOY as

34

Nippon Chemiphar Corporate Report 2023

growing expansion in domestic use of the allergy screening
kit and reagent DropScreenTM gained momentum, driven
by new added production capacity as well the start ofpromotional support from our pharmaceutical sales
department since 3Q. As a result, combined sales in the
Pharmaceutical Products segment decreased by 3.0% YOY
to ¥30,543 million.
In the Others segment, sales came to ¥1,015 million,
higher year on year thanks to the steady performance ofcontract testing.
Consequently, consolidated net sales came to¥31,559 million (down 2.9%YOY).
2. Profit
The Company recorded a consolidated operating lossof ¥241 million. Although we made efforts to reduce thecost of sales and recurring expenses, a higher cost ofCorporate Data

(Millions of yen)
FY2017(Ended March 31, 2018)

FY2018(Ended March 31, 2019)

FY2019(Ended March 31, 2020)

FY2020(Ended March 31, 2021)

FY2021(Ended March 31, 2022)

FY2022(Ended March 31, 2023)

Forecast for FY20234(Ending March 31, 2024)

35,331

34,18231,756

31,541

32,50631,55932,70034,27932,682

30,63230,42331,50130,543—29,872

28,31526,42525,532

26,28324,80324,640

2,009

1,548

1,362

1,790

1,754

1,345

1,230

2,613

2,780

4,500

1,051

1,500

1,123

1,117

1,004

1,015

—

19,535

19,654

19,20020,09723,432

23,374—

13,947

13,063

12,19010,879

8,248

8,425

—

2,280

2,066

2,173

1,998

2,392

2,419

2,820

1,848

1,464

364

564

825

(241)

200

1,696

1,512

307

582

1,022

58

100

1,160

881

436

495

700

339

60

46,69846,92645,862

47,12449,453

48,571—

17,487

17,863

17,39218,01418,501

18,534

—

3,188

2,196

1,394

1,503

1,801

(916)

—

(1,606)

(960)

326

(1,024)

35

(394)

—

(1,741)

110

(961)

29

(793)

144

—

1,645

784

660

1,812

1,131

573

3,700

1,192

1,345

1,272

1,393

1,586

1,500

1,450

315.28245.11121.42137.75194.33

94.07

16.62

4,859.86

4,963.24

4,830.92

5,006.49

5,119.99

5,130.65

—

100.0

100.0

50.0

50.00

50.00

50.00

50.00

3,025

2,987

1,704

2,099

2,727

1,682

—

5.2

4.3

1.1

1.8

2.5

—

—

6.7

5.0

2.5

2.8

3.8

1.8

—

3.6

3.2

0.7

1.3

2.1

0.1

—

84.0

85.7

85.2

84.0

78.9

81.0

—

37.4

38.0

37.9

38.2

37.4

38.1

—

31.7

40.8

41.2

36.3

32.8

53.2

300.8

816

846

807

760

809

872

—

sales ratio due to NHI drug price revisions as well as thescheduled consumption of R&D expenses drove up SG&A
costs, in addition to which profit was impacted by shipment
suspensions of certain products in December. As a resultof factors including foreign exchange gains, ordinary profit
was down 94.3% YOY to ¥58 million, while profit attributableto owners of parent was down 51.6% YOY to ¥339 million
reflecting a gain on the sale of investment securities.
II. Annual Forecasts
For FY2023 (ending March 31, 2024), we anticipate adecline in sales of the Pharmaceutical Products segment
due to the impact of the NHI drug price revisions
implemented in April this year, but we also project
ongoing growth in domestic market penetration for
DropScreen as well as sales growth in contract testing.
We therefore forecast consolidated net sales of ¥32,700
million, up 3.6% YOY.
At the profit level, in addition to a rise in the cost of

sales ratio due to NHI drug price revisions, we expect anincrease in purchase prices, due to rising raw material
and energy costs. We therefore forecast operating profit of¥200 million and profit attributable to owners of the parentof ¥60 million.
III. Dividend Forecast
Although we forecast a drop in profit attributable toowners of the parent, in the interest of maintaining stableshareholder returns, we plan to pay a dividends of ¥50.0
per share (for a payout ratio of 300.8%).
IV. Capital Expenditure
We are budgeting for total capital expenditure of ¥3,700
million, as we envision additional installations at Building
No. 3 of our Tsukuba Factory to meet the need forincreased production.

Nippon Chemiphar Corporate Report 2023

35

III Corporate Data
Company Name: Nippon Chemiphar Co., Ltd.
Founded: June 16,1950
Capitalization: ¥4,304 million
Securities Exchange: Tokyo Stock Exchange (Prime Section)* Scheduled to transit to TSE Standard Market
on October 20, 2023
Employees: 872 (Consolidated, as of March 31, 2023)
Website: https: //www.chemiphar.co.jp/english/

IV Domestic Locations
Head Office:2-2-3, Iwamoto-cho, Chiyoda-ku, Tokyo 101-0032, Japan
Tel.: +81-3-3863-1211
Fax: +81-3-3864-5940
Discovery Research Laboratories:
1-22, Hikokawado, Misato City, Saitama Prefecture, 341-0005, JapanV Group Companies
Subsidiaries:
Nihon Pharmaceutical Industry Co., Ltd.
Safety Research Institute for Chemical Compounds Co., Ltd.
Nippon Chemiphar Vietnam Co., Ltd.
Affiliated Company:
Japan Sopharchim Co., Ltd.

VI History
1950 Hitachi Chemical Co., Ltd. (as Chemiphar was formerly known) is set up
1969 Nihon Pharmaceutical Industry Co., Ltd. (NPI) becomes an affiliated company
1970 Company changes name to Nippon Chemiphar Co., Ltd.
1971 Listed on Tokyo Stock Exchange (Second Section)
1976 Listed on Tokyo Stock Exchange (First Section) and starts diagnostics business
Establishes Japan Sopharchim Co., Ltd. (currently an affiliated company)
1986 Safety Research Institute for Chemical Compounds Co., Ltd. becomes a subsidiary1988 Launches Uralyt-U (soluble powder)1993 Launches Soleton 80
1995 Launches Calvan
2010 NPI becomes a wholly owned Chemiphar subsidiary; Chemiphar spins off its Ibaraki Factory to NPI(NPI’s current Tsukuba Factory)
2012 Launches DP3000
2014 New plant at NPI’s Tsukuba Factory comes on line
2015 Establishes Nippon Chemiphar Vietnam Co., Ltd.
2017 Establishes West Japan Distribution Center, resulting in one base each in eastern and western Japan2018 Vietnam factory starts exporting to Japan
2019 Acquires approval for the manufacture and sale of PICOPREP from Ferring Pharmaceuticals Co., Ltd.
2020 Launches DropScreen
Acquires sales rights for Klaricid from Mylan EPD G.K.

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Nippon Chemiphar Corporate Report 2023

2-2-3, Iwamoto-cho, Chiyoda-ku, Tokyo 101-0032, Japan
Tel.: +81-3-3863-1211 Fax: +81-3-3864-5940

2023.8